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Amazon Unveils Fire Phone, in Bid to Challenge Apple's iPhone

Todd SpanglerVariety

5:30 p.m. EDT, June 18, 2014

Amazon took the wraps off the Fire Phone -- priced $100 lower than similar iPhone models -- and because the e-commerce company will not be relying on gigantic sales of the new gadget, it could represent Apple's most formidable rival in the category.

At a press event Wednesday in Seattle, CEO Jeff Bezos showed off the 4.7-inch-screen device, which has 2 gigabytes of memory and a 2.2-GHz processor. The announcement came after months of press reports and speculation about the project.

One of the buzz-worthy new features: The Fire Phone's display presents 3D-like images, a technology Amazon calls "Dynamic Perspective" that uses multiple cameras to detect where you're looking. The images on the screen move around, as you move your head to look at the phone.

But compared with Apple's iPhone, the Amazon smartphone is more of an ancillary product, designed to support the core e-commerce business and Prime program. In fact, Amazon Prime was the first thing Bezos mentioned on stage, touting "tens of millions" of members -- the same vague reference the company provided in late 2013.

And that's one reason Amazon is selling its smartphone for $100 less than similar Apple iPhones.

The Fire Phone will be available starting July 25 exclusively through AT&T, in two configurations: a model with 32 GB of storage for $199.99 and a 64 GB model at $299.99 (both with a two-year contract). By comparison, Apple's 32 GB iPhone 5s is $299 and the 64 GB model is $399 (which also require two-year wireless plans).

Amazon's smartphone strategy is similar to its play with the Fire TV set-top box and the Kindle Fire tablets: Yes, Amazon wants to make money on the hardware, and develop category-leading innovations, but the products are ultimately more about the company spreading its commerce and digital-media tentacles as far and wide as possible.

For example, a Fire Phone feature dubbed Firefly uses the device's 13-megapixel camera to automatically identify products -- and then add those to a user's shopping cart. The Firefly service also recognizes songs and TV shows, like Shazam's app: Bezos, in his presentation, demo'd the smartphone identifying a scene in HBO's "Game of Thrones."

Naturally, the Fire Phone also includes Amazon's own apps for video and music, as well as apps for third-party services like Pandora. Last week, Amazon launched Prime Music, an unlimited music service for Prime members stocked with 1 million songs.

Another tie-in with Prime: Amazon is offering 12 months free of Prime service (regularly $99 per year in the U.S.). Member benefits include free two-day shipping on about 20 million products, unlimited streaming of movies and TV shows with Prime Instant Video, Prime Music and more than 500,000 books to borrow from the Kindle Owners' Lending Library. Existing Prime members will have their account extended by an additional 12 months with the purchase of a Fire Phone.

As for what's at stake: Amazon had 2013 sales of $74.5 billion, and Wall Street is not anticipating the phone to drive the top line (or bottom line) in any immediate, dramatic way.

Apple, meanwhile, is heavily dependent on iPhone sales: 57% of its $45.6 billion in revenue for the quarter ended March 2014 was from smartphones. And investors are clamoring to see more growth, anticipating new products in the back half of 2014 like the rumored "iWatch."

To be sure, Amazon is late to the party -- and will likely find it tough to convince vast numbers of consumers to give up their existing iPhone or Android devices. About 70% of Americans now own a smartphone, according to Nielsen. Worldwide sales in the category reached nearly $340 billion in 2013, according to IDC.

Fire Phone is available to preorder starting today at Amazon.com/fire-phone, via AT&T's website and in AT&T retail locations.